On Wednesday, DA Davidson updated its outlook on ZoomInfo (NASDAQ:ZI) Technologies (NASDAQ: ZI), increasing the shares target to $13.00 from the previous $9.50 while retaining a Neutral rating on the stock.
The revised target reflects a more favorable view following the company's recent financial performance and future cash flow projections.
ZoomInfo, known for its cloud-based market intelligence platform, delivered results that surpassed the lowered expectations set earlier in the second quarter of 2024.
Despite the positive outcome, the company presented a cautious forecast for the fourth quarter, citing possible challenges with customer renewals as the year comes to a close.
The company's performance in the mid-market and enterprise segments continues to be positive, although small and medium-sized business (SMB) segments face headwinds.
Additionally, the implementation of a new business risk model is anticipated to impact the growth of new business into the first half of 2025.
A key highlight from the quarter was ZoomInfo's reaffirmation of its unlevered free cash flow (uFCF) guidance for 2024. Furthermore, the company provided optimistic remarks regarding the expected growth of levered free cash flow (FCF) in 2025, which is projected to increase significantly year-over-year.
The analyst from DA Davidson cited the company's long-term cash flow prospects as a basis for the increased price target, which is now set at 14 times the projected 2025 unlevered free cash flow.
Despite the raised price target, the firm maintains a neutral stance on the stock, reflecting a balanced view of the company's potential against the risks it faces.
In other recent news, ZoomInfo Technologies Inc. reported strong financial results for the third quarter of 2024, exceeding prior forecasts. The company announced a GAAP revenue of $304 million and an adjusted operating income of $112 million.
ZoomInfo's net revenue retention rate remained steady at 85%, and its enterprise customer base saw significant growth, with the $100,000 customer cohort increasing to 1,809 clients, now accounting for 44% of the annual contract value.
The firm's Copilot product contributed $60 million to the annual contract value, enhancing customer engagement. In terms of future expectations, ZoomInfo forecasts GAAP revenue between $296 million and $299 million for the fourth quarter and anticipates full-year 2024 GAAP revenue to be between $1.201 billion and $1.204 billion.
Despite a sequential revenue decline of 2% adjusted for specific charges, signs of stabilization and potential growth in key segments have been observed.
ZoomInfo's enterprise annual contract value now constitutes approximately 41% of total revenue, and the data-as-a-service business grew by 22% year-over-year. The company is experiencing double-digit growth in customer migrations to the Copilot tool. These are the latest developments from ZoomInfo Technologies Inc.
InvestingPro Insights
ZoomInfo Technologies' recent performance has caught the attention of analysts, and InvestingPro data provides additional context to the company's financial position. As of the last twelve months ending Q2 2024, ZoomInfo reported impressive gross profit margins of 88.63%, aligning with the InvestingPro Tip highlighting "impressive gross profit margins." This strong profitability metric underscores the company's efficient operations, particularly in light of the challenges faced in the SMB segment.
The company's revenue for the same period stood at $1.23 billion, with a modest growth of 2.78%. While this growth rate is subdued compared to historical trends, it's worth noting that analysts expect net income to grow this year, according to another InvestingPro Tip. This projection could be linked to the optimistic remarks about free cash flow growth mentioned in the article.
InvestingPro Tips also indicate that ZoomInfo has been "aggressively buying back shares," which could be seen as a sign of management's confidence in the company's future prospects. This aligns with the positive outlook on cash flow mentioned in the analyst report.
For investors seeking a more comprehensive analysis, InvestingPro offers 15 additional tips for ZoomInfo Technologies, providing a deeper dive into the company's financial health and market position.
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